INDEBTEDNESS OF FARMERS IN INDIA

Survey data by research organisation Situation Assessment of Agricultural Households and Land and Livestock Holdings of Households in Rural India (SAS) for 2019 released on September 10 show a relationship between size of farm and access to institutional credit, with dependence on the non-institutional credit sources like money lenders and relatives increasing with reducing land holding, except in the case of the largest farms. Among indebted agricultural households, 82.9 per cent were landless, marginal and small farmers.

In 11 of the 28 states, agricultural households reported borrowing more than the national average, with at least eight having an average outstanding loan of more than ~1 lakh. All southern states — Telangana, Andhra Pradesh, Karnataka, Kerala, and Tamil Nadu — reported more than ~1 lakh outstanding loans per household, on average.

Not all indebtedness is problematic, say experts. In Tamil Nadu, for instance in Nagapattinam, agricultural credit from cooperatives is available at 0% interest rate, and if the farmer can pay it back, indebtedness "shows farm credit is working", said Madhura Swaminathan, agriculture expert. But the crucial question is who the farmer borrows from and the reasons for it, as the amount of institutional credit depends on factors such as the size of the land holding.

Among the top three states with indebtedness, Andhra Pradesh (93.2%), Telangana (91.7%), and Kerala (69.9%), 47% of the loans in Andhra Pradesh, and half in Telangana were from moneylenders, according to the report, and more than half of the loan was for farming expenditure.

In six years to 2019-20, 10 states had announced farm loan waivers totalling ~2.4 trillion, a September 2019 report on agricultural credit by the RBI showed. Loan waivers benefit those with institutional loans like big farmers or absentee landlords, while landless and small farmers do not get access to institutional credit, the report says.